Big Manufacturing Layoffs = Executive Laziness
It is unfortunate when you see headlines like this. Mass Layoffs by U.S. Manufacturers Surge in January. Especially when most of these layoffs are probably unnecessary. Layoffs, which used to be the last ditch effort to slash money off the books of a company bleeding red, have become the easy way out. In a new economy, a new normal, for lack of a better term, layoffs have to return to a last option.
How?
If a company with substantial direct/discrete materials spend lays off staff, before completely exploring the bloat in their spend, they have committed an act of laziness and it makes me sad. If you are a services company and the majority of your spend is on staff there is really no choice in the matter, but if companies have a massive cost of goods sold they MUST explore cutting costs for the inanimate before impacting families at a time when community should be in our collective consciousness.
There is, unfortunately, a shocking amount of disorganization and incompetence permeating direct materials supply chains. Over time, this becomes an amazingly large gap between what companies should be paying for their components and what they are paying.
Investigate direct spend before laying off. Don’t be a lazy executive.
Manufacturing, Sourcing, Supply Chain
General Electric invests in Michigan
Yesterday, G.E. announced it was looking to add up to 50 new parts suppliers in the Metro Detroit area. 
G.E. will be having a procurement fair soon and has invited 200-300 suppliers to participate. The appliance division, headquartered in Lexington, KY will be sourcing 500 components, representing approximately $25 million in spend at the fair.
G.E. plans on taking advantage of substantial capacity in the metro Detroit area, specifically in molded plastics and formed metal. G.E. has an understanding of the landscape of discrete manufacturing supply and is taking advantage of a depressed geography to find cost competitive suppliers with open capacity that are hungry for new business.
This is a great move for G.E. A great move for Michigan, and a blazing beacon for the rest of the sourcing world. Massive opportunities exist to find hungry, cost competitive, qualified suppliers in North America. Companies need to open their eyes, look around and take advantage.
David Landsman
Global Sourcing, Manufacturing, Sourcing, Supply Chain
Seriously Europe, where are your direct materials programs?
I love our European cousins, truly. They bring different perspectives and cultural opinions to almost any discussion. However, currently, 
European sourcing professionals are missing one of the biggest opportunities since the Portland Trailblazers drafted Sam Bowie ahead of Michael Jordan in the 1984 NBA Draft.
The United States manufacturing market.
If there is one advantage to the dollar being depressed it is that American manufactured goods are going to be more cost competitive oversees. The world cannot wait for President Obama’s export increase plan to go into effect. They need to get proactive and Source American now, while the dollar is weak. Locking in some good terms and pushing down the accelerator on European recovery should be on the top of their priority list.
Where are you Europe?
I mean, come on… look at the picture. European Union countries are shopping at a 25% discount through the door and the United Kingdom is shopping at a whopping 36% discount. I know logistics and tariffs are going to eat some of that up, but holy cost savings Batman! I know American sourcing professionals would be really excited about that sort of easy opportunity. (Secret: They should be, sourcing domestically right now might be a bigger opportunity for American manufacturers than European) High quality manufactured components at a natural discount… I expect my phone to be ringing off the hook. Here let me help out the European sourcing directors out there. Call us. We can help hook you up with suppliers that have open capacity right now who you can Ameri-source your components to.
David Landsman
Manufacturing, Sourcing, innovation
Source Direct Materials Smarter in 2010 – Innovation Starts With You
Things are different. If we learned anything in the last 18 months it should be simply that, things are different. We absolutely cannot expect to work business as usual when it comes to how we do our business. It is a drum beat I have been hearing every day. There are big opportunities out there. They are waiting for senior procurement professionals to seize them and say, THIS YEAR WILL BE DIFFERENT!
It is time to stop pointing at indirect materials cost savings and thinking its enough. That just will not play in this kind of business environment. Manufacturing companies have a unique opportunity to be more aggressive about cost savings than any other kind of company. Yes, it is possible to save a million here and a million there on things like travel and office supplies, but when measured against the fat in a direct materials supply budget it isn’t a contest.
It is a lean time in the manufacturing world and there is aggressively competitive capacity to be had. Don’t be afraid. Find it. Don’t just identify cost savings. Achieve it.
How does a progressive company really achieve cost savings?
They come into the process ready and willing to change suppliers. They come into the process ready and willing to look in new geographies for suppliers. They come into the process without hesitation and take full advantage of what the last 18 months have left us. The landscape is new. Look at it with new eyes.
David Landsman
Industry, Manufacturing, Purchasing, Sourcing, Supply Chain, innovation
Industry is Cool – Boyd Coleman of Karl’s Event Rental
Boyd Coleman is the manufacturing manager with Karl’s Event Rental. Karl’s was responsible for the construc
tion of over a million square feet of tent at the Vancouver Winter Olympics currently underway including a 50,000 square foot tent being used by the athletes as a dining hall.. He was kind enough to join us today for a few questions.
MFGSourcing: Tell us a little about your company. Have you worked on projects like this before?
Boyd Coleman: We have done large projects such as the Super Bowl, New York and Los Angeles Fashion Weeks, Breeder’s Cup, and some NASCAR Events. The Winter Olympics is the largest we have done so far with over 1,000,000 square feet of temporary buildings and flooring. We have also done disaster relief work including construction of base camps after hurricane Katrina.
MFGSourcing: Boyd, how long in advance is a project like this quoted? When did the planning begin?
BC: Planning started over 18 months ago. The manufacturing process began in January of 2009 and the first trucks started shipping in May. We ran 24 hours a day 7 days a week for a year. When you’re doing that, there is no room to work extra shifts to catch-up and the importance of suppliers meeting deadlines increases drastically.
MFGSourcing: What were some of the challenges you faced in the project planning stages?
BC: Some challenges included modifying our product to handle the snow loads required especially in Whistler. One particular structure was used as a hospital and needed an extra strong floor to handle heavy equipment such as CAT scan machines et cetera. There were also a few structures that needed special openings for helicopters, fire trucks and buses to enter.
MFGSourcing: Is there a cool factor with a project like this that gets you more excited than your every day stuff, or is it just business as usual?
BC: Working on a project like this definitely generates some excitement. The size of the project alone is extraordinary, plus there is some pride that goes with supplying the Olympics.
MFGSourcing: What types of suppliers did you find through MFG.com for this project?
BC: We do a lot of our own manufacturing, however some of our capabilities are limited when it comes to millwork in steel. Currently we are only setup to do aluminum milling. (We own a specialized machine that can work on 5 sides of a 40’ extrusion.) We used MFG.com for some of the steel parts. In the past we would have outsourced welding and laser cutting, but due to the size of this project it made sense to purchase equipment and bring that in house.
MFGSourcing: How much did MFG.com reduce your sourcing time on the project over your customary sources?
BC: MFG.com is great because of how easy it is to compare quotes. Sending out RFQs on your own is fine, but you’ll often receive responses sporadically and with different terms. Also MFG.com introduces you to suppliers that you wouldn’t have known existed, sometimes in your own backyard, as was the case with this project.
MFGSourcing: Do you feel like MFG.com helped you contain the project costs?
BC: MFG.com helped reduce project costs by finding new suppliers that were still local for existing parts we were currently paying a lot more for. I also like to ask suppliers when quoting what they would change on the part to make bring down costs. On two occasions this really paid off. There was one part we were paying $10 for, and the gentleman quoting had an idea that brought the cost down to under $2. Needless to say he won the bid.
MFGSourcing: What’s next for Karl’s? Any other cool projects on the horizon?
BC: Right now we are grabbing a breather from the rush of the Olympic project so we can be ready for whatever comes our way.
MFGSourcing: Thanks so much for joining me today!
________
Karl’s Event Rental is a fantastic example of a cutting edge company, using the powerful tools and information freely available to every manufacturer to be more effective and efficient in their sourcing process and finding strong partners where they need assistance.
David Landsman
Don’t use a fire extinguisher to source!!
Supply interruption.
It is a phrase that can send an executive into a panic. Supply interruption can force a company to make a budget crippling and profit killing decisions. If direct materials are involved, let me give you some advice;
Don’t panic.
I know. Don’t panic. It seems so simple, but you would not believe how many people really handle a direct materials emergency badly. Supply management professionals see a direct materials emergency as an excuse to throw cost containment to the winds. Panic creates short term and long term problems.
Short Term:
It is often completely unnecessary. Why? Getting access to suppliers with IMMEDIATELY available capacity is not the difficult prospect it was 10 years ago. Ten years ago, if something unforeseen took place then a sourcing professional’s only recourse would be to call over to their regular supplier and ask for a part urgently. Often times the current supplier couldn’t meet the emergent time-line. Other situations would have the buying company incurring a change fee if the supplier would have to take a job off their machines to run the quick turnaround job. In the cases the supplier couldn’t or wouldn’t help, the buyer ended up flipping through some big paper catalog, hoping to find a supplier close by that could meet his time-line at a reasonable or really ANY price, with limited and often no success.
Now, tools exist that give you instant access to suppliers with open capacity. The best part? It is completely unnecessary to build a list and make phone call after phone call to try and find a supplier that will fit your needs. The ability to tap into the open marketplace and have suppliers with immediately available capacity get in touch with you is a brilliant and efficient reversal to what was a wholly inefficient process. Unfettered access to a free and unencumbered market almost guarantees cost containment because of the competitive nature of this type of e-sourcing engagement.
Long Term:
In our hypothetical scenario our legacy sourcing agent has created a dangerous precedent with his emergency scramble for a source. When a premium is paid to a supplier in an emergency there is the potential to have a long term effect on the bottom line. The next time the emergent component is purchased, the last supplier used and the last price paid often become the new baseline cost. This is another incredible inefficiency cured by instant access to open markets. Don’t get burned by past mistakes. It’s unnecessary.
David Landsman
Space – The Private Frontier?
In last Wednesday’s State of the Union address, President Obama indicated intentions for a spending freeze in 2011. 
Large government programs like Social Security would not be included in this freeze, but government organizations like NASA, were bracing for major budget cuts.
Turns out, NASA is on target for a budget increase. Today the AP is reporting that NASA is slated for a $6 billion dollar budget increase over the next five years specifically to innovate a space taxi system and bolster the private space industry. I believe this is a great move. Innovation sometimes needs to be pointed in a direction. The private space industry seems to have lost momentum and focus since it was born.
MFG.com was there at the true functional birth of private space. We enabled it in an incredibly specific way and watched it grow. The drive at the time was to win the X-Prize. Many X-Prize competitors used MFG.com to securely find qualified suppliers to build their components. The effectiveness and responsiveness of the MFG.com e-sourcing marketplace responded to the need of an emerging market and helped it take flight.
Then it got quiet. Scaled Composites won the prize with its completely cool Space Ship One and no one was really sure what to do next. Bigelow Aerospace is building a spaceport. Blue Origin did a test launch of a super cool pod, but their last website update was 2007. To be fair to Scaled Composites, they are the primary driver behind Virgin Galactic and they have some real velocity while others have stalled, but overall the industry seems like it is in mild disarray.
Today, however, everyone was given a direction. Build NASA a space taxi and you have a regular customer so you won’t have to worry about selling tickets to tourists at $200,000 a pop.
One of the coolest things about MFG.com is we can shrink time to market for almost any engineered to order product. It was exciting to watch an industry come to life on our marketplace and I am really looking forward to helping the private space industry mature.
David Landsman
Industry, Manufacturing, Purchasing, Sourcing, Supply Chain, innovation
The Automotive Supply Chain-Glass Half-Full
The evolution of the automotive industry is happening before our eyes.
Jason Busch wrote about the failing automotive supply chain today on Spend Matters. It is an excellent piece and points out two critical challenges facing a recovering automotive sector.
1. Lack of access to capital as OEMs ramp up production.
There is no question there is a major problem here and banks must start lending and be given incentive to lend. There is so little justification to keeping the flow of capital tamped it is almost criminal for the banking industry to behave the way it is behaving. Then again, it was the banking industry behaving irrationally and possibly criminally that put the U.S. economy into a tail spin to begin with.
2. Questionable supplier rationalization practices by the large automotive OEMs
As ever, Jason is well thought out, rational, and correct. I am not a fan of the automotive industry’s attitude toward supply management either. However, I see an automotive supply base that is finally getting with the program and changing directions. At the Detroit Auto Show this week there were a number of reasons to be optimistic. There were several major announcements regarding retooling Michigan plants for electric vehicles and green energy initiatives and we aren’t talking about small investments. (The investments announced here are worth well over $1 billion)
General Motors, Ford, and especially Chrysler may be on the wane, but there are plenty of companies on the rise and they are all going to need suppliers who are experienced and invested in the manufacture of quality automotive components and associated goods. It is an ever-growing number of potential new customers that are getting me excited about an increase in overall automotive supply health.
Greener automotive start-ups are achieving new heights every day. Tesla Motors announced their newest model this week. Fisker Automotive announced $115.3 million in private equity funding that will secure them access to a $528.7 million conditional loan from the U.S. Department of Energy. In addition to their funding Fisker announced a major supply contract with A123 Systems to make batteries for the Fisker Karma. Bright Automotive is also floating major news about a joint venture. Capital is flowing, but it seems like it is going to those trying to innovate, which is where the smart money should be.
It isn’t just the domestic innovators that are making me feel better about the future of domestic automotive manufacturing. I know that sounds strange, but Tata Motors announced it plans on bringing the Nano to the U.S. market in 2012. The little car that changed the industry will need some re-engineering before it will be ready for American roads but it is coming. North American manufacturers will eventually feel the benefit of the arrival, because almost every successful international auto-maker is currently building cars in North America.
My conclusion is one of optimism. There are challenges we will all have to face in 2010, especially in the automotive sector. The smart OEM is going to enable its supply base financially and be able to ramp up production as necessary. The smart Tier 1 or Tier 2 supplier is going to focus on new business development and take advantage of a hungry market with open capacity to better serve their current customers. The smart bank is going to get the money flowing and smooth the road for everyone.
David Landsman
© 2010 MFG.com Sourcing. All Rights Reserved Terms of Use.